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Debit Card Fees Will Hasten Consumer Trend To Mobile Payment

09/30/2011

 

 

 

Yesterday Bank of America, the nations largest bank, announced it will begin charging consumers a $5 monthly fee for using BofA debit cards. Other banks are considering following BofA, too.

This comes in the wake of regulations in the Dodd-Frank bill limiting the per transaction fee that has been borne by retailers from 44 cents  to 21 cents. Sounds like pennies – but multiply it by millions of transactions and the impact is staggering. The new limit is expected to cost US banks about $6.6 billion in revenue a year. Banks need to replace this high margin revenue but transferring the costs to their customers may have inadvertently undermined customer loyalty. Across the country angry consumers are cutting up their debit cards. Many are switching to smaller, local banks who are unlikely to assess the same monthly fees for their debit cards. Another consumer response is likely to be the escalation of mobile payment.

Last March, on the 16th to be exact, I said, “I’m predicting that 2012 will be the year of the mobile payment movement.”

 

Mobile payment, if you’re unfamiliar with the concept, is when consumers use their phones, like a credit card, with the help of a special near-field communication (NFC) microchip. Consumers could conceivably leave their wallets at home and pay with the tap of a phone instead.  While mobile commerce (buying stuff from online websites was nearly a $5 billion business in 2010, the forecast for 2015 is jaw dropping. Shoppers around the world are expected to spend about $119 billion on goods and services purchased via  mobile phones. That number represents about 8% of the total e-commerce market.

But back to mobile payment, which is yet to take off in the USA. The new debit card fees and smartphone ownership trends could hasten that change. Research shows that 54 percent of new phone purchases are smartphones and that 36 percent of Americans currently own a smartphone.

Be prepared for your smartphone to be even more hardworking in the next few months. Once your phone becomes the gateway to purchases you’ll never want to “leave home without it.”

 

 

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